Senate passes new homeowner protection

The Senate this morning passed a homeowner protection amendment from Oregon Sen. Jeff Merkley and Minnesota Sen. Amy Klobuchar.

The two Democrats’ amendment to the Wall Street reform bill prohibits mortgage lenders and loan originators from accepting payments based on the interest rate or other terms of the loans, a news release from Merkley’s office said. In addition, it will require lenders to document income and other underwriting standards to ensure borrowers can repay their loans. This will end the damaging and deceptive practice of “no doc” and “liar loans,” the statement said.

The Senate passed the legislation 63-36 primarily along party lines, with six Republicans siding with the majority Democrats, including Massachusetts Sen. Scott Brown. He also was the only Republican to co-sponsor the amendment, joining Merkley, Klobuchar and eight other Democrats.

Merkley hailed the amendment’s passage in the news release.

“We took a huge stride forward today,” he said, “in the fight to restore fairness for homeowners and strengthen the financial foundations of our families.”

Klobuchar added that “complex and deceitful lending practices were at the heart of the financial crisis.” Reforming Wall Street, she said, means Congress must protect consumers from predatory loan practices.

“Helping everyday Americans obtain sound loans,” she said, “while avoiding unnecessary risk is essential to restoring our economy.”